Bryce Harrison

Seems like each time I read something coming from the Ash Institute from Harvard, I am left shaking my head in disbelief.  It has now advanced to the point where I just accept that they will say things that defy all reality.  They can spin a web faster then any spider I know. 
In the latest travesty John O’Leary in Driving Change: Go Big or Go Home likens government to driving a bus where everyone has access to a brake.  Meaning anyone can kill any change program in government.  He uses this as an impetus to basically run over people to achieve change.

With apologies to one of our fine educational institutions this is ridiculous.  What got us in the mess we are in today is our inability to seek knowledge before seeking change.  Government management can only make assumptions about one thing . . . that they need to get knowledge before introducing change.

The cost of not getting knowledge is to guarantee failure in any organizational change management program.  The result is higher costs, worse service and a poor culture.  The political spin of this has to be exposed as they administrations point to those costs that go down and not to the ones that increase due to this flawed approach.

Any new administration at any level of government management would be well-served to start by performing "check."  This means understanding the what and why of current performance.  Not to come in with pre-conceived notions, agendas, mandates, milestones, schedules and project plans. 

Further, Mr. Leary promotes the favorite of the Ash Institute which is cost cutting.  Even worse he promotes it as a top-down exercise.  Both of these again are command and control moves that increase government spending . . . let me explain.

Costs are often seen from activity and productivity numbers that are leading government management to take a shared services strategy or outsourcing.  What the fail to see is that cost are in the flow not the scale of activity (economies of flow).  To focus on costs increases them and instead we need government to focus on the causes of costs that are in the flow.

With respect to top-down implementation of a political agenda, we would be much better served to design our government systems from the outside-in.  This requires understanding demand while getting knowledge in "check."  When we don’t understand demand we stand to outsource failure demand (demand caused by a failure to do something or do something right for a customer) or share services that shouldn’t be shared.

I have found a better way (as opposed to top-down) is to get knowledge of the work and engaging government workers.  Rather than a small group by engaging employees we get far more ideas for innovation.  And larger changes are accepted because when we make decisions with the knowledge of the work we don’t alienate those that do the work. 

Think about it . . . would you rather have a small group innovating or the assistance of thousands to help facilitate change?  When you don’t make decisions with the work we wind up with SNAFU and FUBAR types of results and activities.

Workers engaged and understanding purpose and customer measures should be allowed to experiment with method.  This experimentation can lead to new methods and innovation.  New administrations would be wise to tap into this valuable resource pool.

Indiana has had a massive failure in the Welfare Modernization project they just cancelled with IBM.  Let’s not spin this any other way than a disaster that cost taxpayers money by not doing the things I have outlined above.  More approaches like this and we will continue to have to sell the public’s assets to meet the fiscal responsibilities of the state.

Join us for a new and better way to improve government at www.thesystemsthinkingreview.com

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Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

If I were to tell you not to share would I be asking you to break the Golden Rule we learned as kids?  Hardly, but I am badly outnumbered by the likes of such "thought leaders" as Gartner, Accenture, IBM, AT Kearney and other entities that promote a shared services strategy.  I have to be wrong when the numbers are so great against me . . . really?

As positive a phrase as "shared services" sounds, it belies the negative side that no one wants you to know about.  The government management paradox that shared services wind up costing you more for less government services.  What?  They didn’t tell you?

Let’s take a look at what is missed:

1.  Did you have an optimal design in the first place?  Rarely, are government entities provisioning services in an optimal manner.  The rush to cut costs bypasses a bigger opportunity for improvement . . . the design and management of work.  Something the US government management doesn’t do well (but neither does the private sector – even though they claim to provide better service).   Most of the time all we do in sharing services is perpetuate a bad design and locking in waste.
2.  Did we really need that front and back office in the first place?  This goes hand-in-hand with #1.  When we combined back offices, did we need that back office in the first place?  Most of these I have found can be designed out and services provisioned less expensively.  Our thinking is the problem as we functionally separate the work and try to optimize each piece creating sub-optimization. 
3.  Did you understand demand?  A bad assumption is that all demand is demand we want from our constituents.  This is never the case.  Failure demand (demand caused by a failure to do something or do something right for a customer) can range from 25
   to 75% or more in government entities.  Sharing services without knowing this number is to lock-in and even increase costs.
4.   Did you know that costs are not in the scale, but in economies of flow?  A government management paradox is that costs are not reduced my scale, but by improving the flow.  A service provisioned well costs less tan one that isn’t.  To achieve this we must improve flow end-to-end from a customer perspective.  Understanding this can even have us achieve public sector innovation.
    

It is ridiculous to assume that combining things will lower costs in government, but a snappy tie or shoes and a well-known consulting firm, internet magazine or technology company can be mesmerizing.  Just remember that what you are seeing is slight of hand and will result in taxpayer and voter dissatisfaction.

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Learn more about improvement in government . . . the better way!  Got to www.thesystemsthinkingreview.com and make the taxpayer happy.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

 

• The CEO or leader must get their hands dirty, meaning that they have to understand the work.  The place where business is transacted between the customer and their company.  No more can they rely on vendors, reports or anecdotal evidence of what is happening in the business.
• The must quit managing by the financials to improve service.  To focus on costs is to increase costs.  The management paradox is as strange and uncomfortable as it sounds.  Yet, to improve service business we must understand the causes of costs.
• And the causes of costs are not in the scale as we have all been taught in our college economics classes, they are in the flow (economies of flow), end-to-end from a customer perspective.
• That technology, shared services, outsourcing, standardization, best practices, scripts, and benchmarking have helped to lock in costs rather than reduce them.  These are all things that we have been held to be self-evident as in truth.
• Some say it sounds like there will be less control using a systems thinking approach, when in fact there is greater control.
• Giving up command and control measures like those of cost and productivity is very uncomfortable.  Until managers understand they are replaced with better customer measures and done in an emergent way based on informed choices (meaning with good knowledge at your speed).

So yes, there is much to be afraid of in moving to a systems thinking approach.  We can only promise that the first step is the hardest . . . but the results are phenomenal.

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Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

• You have to be curious (required).  If you are doing well (either real or perceived) you won’t be interested in getting better.  Unless of course you understand that things can change at any moment because of an economic downturn, new competitor or just a never satisfied feeling.  The first step is always the hardest, but for a change in thinking about the design and management of work the rewards are huge.
• Read the Books (suggested). Freedom from Command and Control or Systems Thinking in the Public Sector.  Both are excellent reads full of paradigm busting, counter-intuitive truths and management paradoxes.  They will challenge your thinking.
• Read the Fit for the Future series six parts in all.  This would be the abbreviated version of the thinking for someone trying to get a feel for systems thinking.
• Read the Blog (suggested).  The Bryce Harrison blog can be found here.  It is full of short reads on a better way and challenges assumptions ranging from shared services to standardization.
• Free Download – Understanding Your Organization as a System (suggested).  Almost 200 pages of background information on systems thinking.  The document is a workbook to help with the thinking.  Your email address is required and you have an option to sign-up for the newsletter (or not).  We do send updates to those that download on systems thinking articles and significant events.
• Sign-Up for Our Newsletter (suggested).  This monthly publication can be signed up for at www.newsystemsthinking.com and let’s you know what is happening in the systems thinking world.
• Check Out the Systems Thinking Review (suggested).  This is primarily for the public sector, but you can learn alot here.
• Find us at Twitter, LinkedIn or Facebook (optional).
• Email us at [email protected] (optional).

• Get Knowledge.  You will face resigning leaders and others that will leave with the political overhaul.  Most of what they learned will be lost.  Before any political agendas come roaring in, the new administration must get knowledge of the systems they wish to change.  This needs to be done by the leaders and not abdicated to a vendor, underling or anyone else (as most of these folks have their own agendas).  So, before the first plan, milestone, schedule, etc please begin by understanding the "what and why" of current performance (please see: performing "check").
• Understand that to Manage Costs is to Increase Them.  New Jersey is in a poor fiscal state and Virginia is better than most other states, but let’s face it this is hard times for state government.  The immediate reaction is to focus on cutting costs.  The government management paradox is that this always increases costs.  Governments work on what seems obvious missing the causes of costs. (Please see: Managing Costs Increases Them)
• Don’t Start with the Bad Assumptions.  There are several I see in government here are three:

1. Bad Assumption #1:  Technology is the Answer.  After a decade of working with large technology vendors, I can tell you this is not true.  In most cases, technology locks in the waste and sub-optimization of a poorly designed system.  The will tell you about other government successes, best practices, benchmarks, government analytics and more, but fail to deliver the value governments so desperately need to reduce costs and improve service.  Their aim is to improve their own bottom-line . . . not yours.  (Please see: Throwing Technology at the Problem)
2. Bad Assumption #2:  Shared Services Strategy.  Sharing services is NOT a no-brainer.  Government management must understand that sharing services without knowledge leads to higher costs and worse service.  (Please see: Dos and Don’ts of a Shared Service Strategy and The Case Against Shared Services)
3.   Bad Assumption #3:  Outsourcing/Privatization.  I’ve been a CIO in state government, it is unrealistic that we wouldn’t have outsourcing and/or privatization.  The problem is that in many cases we are outsourcing our failure demand from constituents (demand caused by a failure to do something or do something right for a customer).  This locks in waste, we need to improve the system by redesigning the management and work.  I have found this reduces technology spend, improves service and costs less on a large scale.  (Please see: Outsourcing: Why it’s a Bad Idea and Better Tips for Government IT Outsourcing and Shared Services)

• Understand that Your Greatest Lever for Improvement is the Design and Management of Work.  Understanding that a different line of thinking about how to manage and improvement through better work design is a huge leap in reducing costs as it addresses the fundamental thinking problem around the causes of costs.  Government management should take time to browse "Systems Thinking in the Public Sector" and the website for government systems thinking at www.thesystemsthinkingreview.com. 

My hope for both of these new governments is that through better thinking you can serve constituents better and be good stewards of their money.  Government management requires a different look at some age old problems . . . doing more with less.

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Need help with transitioning government, reducing costs or improving service.  Call us at (317)849-8670.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

 

The debate at sixsigmaIQ.com was one that has been boiling for awhile.  However, I believe it is an important one.  I sense this will be the first of many as systems thinking begins to penetrate the minds of people in the improvement arena.

With a background that dates back to the  W. Edwards Deming movement and the Deming User Groups I am sensitive to how people hijacked Dr. Deming’s thinking into something that could be packaged and sold.  Dr. Deming did not reference a label for his thinking and did not promote TQM.

Instead, Dr. Deming gave us 14 Points and 7 Deadly Diseases and later his System of Profound Knowledge (Appreciation for a System, Theory of Variation, Theory of Knowledge and Psychology).  These were guiding principles for those wanting to increase market and market share, improve service and decrease costs through better thinking.  They were (and still are) management paradoxes and counter-intuitive truths that challenged the very fiber of US manufacturing, service and government.

Industrial tourists of all types have visited and written about what the Japanese and later Taiichi Ohno (Toyota) did and came away with new secrets to improvement.  It started as Just-in-Time manufacturing, Quality Circles, etc. and later 5S, Standard Work, A3 and other tools.  The US organizations always looking for a short-cut were hungry for what these folks learned as they became less competitive on an international scale.

The Japanese on the other hand were only too happy to invite the tourists into their plants because they understood it was the thinking not the copying that gave them the advantage.  But copying seems to be a staple in US business . . . because it is a short-cut.  The problem is that it doesn’t work or doesn’t work for long.

Whether Lean = Tools to me is an individual assessment of everyone that applies "lean."  If you find yourself starting with 5S, Kaizen events and such you may want to consider the long-term impact of such actions.  Just as not changing the mindset of managers and executives will reverse all the work that is done . . . no matter how well-intentioned.

The bottom-line is if the thinking doesn’t change the system doesn’t change.  This cannot be pushed away from a executive, manager or the front-line worker they all must play to improve the system.  The reward is dramatic improvement.

I partnered with John Seddon because he has advanced the thinking, something we haven’t done very well in the US.  His knowledge of applying systems thinking to service industry and government is something we all can learn from in the US.  And it all begins with being curious about what he and his Vanguard firm has learned.

I have learned about the problems with tools, standardization, shared services, outsourcing, scientific management theory, and separating the decision-making from the work.  I have also learned that manufacturing is different from service and that copying is not a good idea.  Some I have learned from Deming, some Ohno and some Seddon.

There are many other things I have learned and much more to be learned.  But we need to start with changing our thinking. 

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

 

1. Assess the Need
2. Measure Total Cost of Ownership
3. Carefully Craft the Contract
4. Get Everyone on Board
5. Win Approval from the Top

These all appear logical enough which makes most of what I am about to say a management paradox.  Most of the argument is predicated on the cost cutting and efficiency mindset.  We (my Vanguard Partners and I) have long found that a focus on cutting costs always increases them.  To focus on costs is to miss the causes of costs.

1.  Assess the Need.  Nowhere in assessing the need does anyone talk about the functional separation of work and that optimizing each piece leads to sub-optimization.  Or that IT is a supporting service that supports the actual work and can not be viewed separate from the work.  Doing so leads the actual work to fail while IT "saves money." 

It would be difficult to say that the State of Pennsylvania didn’t save $316 million in IT, but they can’t show me that by sharing services that they didn’t increase the end-to-end costs by $500 million by provisioning services with a shared or outsourced service center.  These are the results found by my colleagues in the UK when assessing such moves.

If we are going to assess needs there should be a review of the services that are being provisioned.  In many cases we have already designed in waste with front and back offices.  This by itself begs the question of whether we even need IT, if a better work design can be found (and it usually can).  By studying customer demand and purpose (or called performing "check") government services can be designed more optimally, lessening the demand for IT.

In assessing needs there is another faulty assumption around economies of scale.  A management paradox is that costs are not in the scale, but in the flow (economies of flow).  If or when government management understands this we can get on with saving money . . . on a large scale!

2.  Measure Total Cost of Ownership.  Sounds reasonable until I read the article and realized they were talking about IT and not the end-to-end system.  The focus on costs again doesn’t account for the end-to-end service delivery (system).

The article discusses the IT costs like labor, overhead, benefits, office space, etc. but think about the cost of a contract, monitoring the contract, all things that are typically not done well by States.  Waste begets waste so government management will hire the inspectors/monitors/auditors too.  Good segway to . . .

3.  Carefully Craft the Contract.  Having SLAs is a huge waste in government (please read: SLA: Stupid Limiting Agreement) not only the crafting, but once crafted they are like chasing jell-o across the table.  You seem to have one nailed and something else always slips through your fingers.

Targets for times are always a bad idea . . . targets in general are a bad idea.  The example of answering calls in under 60 seconds at a 95% service level is an example of the ignorance perpetuated.  I outline why in my article Call Center AHT-Wrong Measure, Wrong Solution.  The prescribed measure of service level is settling and adding costs to IT.

A good measure of understanding is to track failure demand (demand caused by a failure to do something or do something right for a customer).  This runs between 40-90% in government and offers a huge opportunity to improve.  Outsourcing or sharing services without knowing this number is to lock in waste.

4.  Get Everyone OnBoard.  When workers know a bad deal and the disruption to their work they object.  Seeing that Outsourcing and Shared Services is done command and control style (top-down) is a huge failing of these projects.  Performing "check" means understanding the work that delivers the service (and that is not IT).

It was AP Sloan that separated the decision-making from the work in 1930s GM, government management must start putting decision-making back with the work.  This means they need to understand the work, not use a report, vendor or anecdotal liaison.  To fail at this is to increase costs and worsen service.

The whole benchmarking of processes is another gigantic waste.  Every state, federal agency, city or local government is a unique system.  To draw conclusions about processes through benchmarking is ridiculous and wasteful.  Each government entity has different demands, work design, structure, people, management, etc. and to benchmark is to lead to copying.  Everything you need to improve your system is contained within it.

5.  Win Approval from the Top.  I agree here, but not the way one might think.  The "top" must get knowledge by performing "check" on the organization, not by a command and control dictate using assumptions about the work.  The input for this article is all about keeping in line.  This approach is costly and damaging.

So, that is it.  A better way to approach outsourcing and shared services requires knowledge and thinking.  Before any shared services or IT outsourcing strategy takes place we need to understand current service performance.  This can be accomplished by studying customer demand (what customers want), capability (how well it is delivered), the value work (the service customers want efficiently), waste and its causes.  We can then improve service where it is currently delivered and then have a knowledge-based discussion on shared service or outsourcing opportunities.

To learn more click on shared services strategy or IT outsourcing strategy from my blog or go to www.thesystemsthinkingreview.com

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

 

A June article at  PublicCIO via GovTech.com (Shared Services Roadblocks and Rewards Examined at Harvard Summit) outlined a Kennedy School Leadership Summit on Shared Services.  Folks from all over the world coming to America’s top business school . . . to learn the wrong thing to do. 

The faculty chair (Jerry Mechling) of the Leadership for a Networked World program was there to explain what shared services is, how it can benefit government and the problems with implementation.  According to Mechling "the current economic crisis is a window of opportunity for government agencies to move to a shared services environment."  Mechling cites greater efficiency, but of course can NOT cite greater effectiveness.

The usual shared services strategy talk of sharing back office functions is noted.  No one ever asks whether we need the back office or talk of understanding demand.  Just that we can have improved delivery and boost local economies.  Improved delivery in our experience rarely (or never) happens.  And "moving out of Manhattan to someplace where it becomes an economic development tool" means robbing Peter to pay Paul.

As with most shared services strategy the focus is on cost-savings and improved efficiency.  I have written many articles on why focusing on costs always increases them.  These shared service projects wind up having to hire more people as service declines and agencies have to get the work done.

David Wilson (Accenture) topped of the madness by making the statement "Believe it or not, there are some governments where the corporate culture does not focus on cost-cutting and efficiencies."  Mr. Wilson, all I can say is you need to understand the management paradox that to focus on costs always increases them, but to focus on value will decrease costs and improve service.  Government management don’t be duped . . . there is a better way.

Relevant articles:
Shared Services

Service Paradox: Managing Costs Increases Them

Also, see: www.thesystemsthinkingreview.com


Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.
 

1. A Focus on Costs Increases Costs.  The flawed belief that economies of scale reduce costs prevails in government management thinking.  We have found that costs are in the flow (economies of flow).  There is a dire need to end the fallacy that reducing costs as an objective works, governments need to find the causes of costs and they are in the flow.
2. Standardization Can Make Things Worse.  A difference between manufacturing and service is variety of demand.  Standardization can (and usually does) lead to the inability to absorb variety of customer demand.  This leads to increased costs and worse service in the form of failure demand (demand caused by a failure to do something or do something right for a customer) which increases when services can’t absorb variety.
3. Technology can lock in Waste.  Too many modernizations get kicked-off with faulty assumptions that technology and automation will improve things.  There are some things that technology is good at and some things that humans are good at . . . and in service humans are better able to absorb variety.  Further, standardization locked-in by technology is to institutionalize waste in government. 
4. Perform "Check."  Before making changes of any type government management must get knowledge about the service they want to change.  This means understanding the "what and why" of current performance.  No plans, schedules, milestones, projects, cost-benefit analysis, etc. can precede getting knowledge.
5. A Big Lever for Improvement in Government is the Design of the Work.    The reality is that the design of the work to be done is flawed and needs to be redesigned against customer demand eliminating hand-offs, redundancy and other wastes. 
6.  Sharing Services and Outsourcing without Knowledge is to Invite Trouble.  In desperate attempts to cut costs quickly these two methods are deployed as "no-brainers."  Without knowledge gained from "check" these methods are typically disasters.  They ignore the causes of costs and focus on visible costs. 
    

There are many more of these management paradoxes and counter-intuitive truths that have been learned that should be communicated.  Many before us like W. Edwards Deming, Taiichi Ohno and others laid the foundation for learning.  This is not best practice or tools as these stagnate learning, but theories of management that have universal application. 

Please join us in making government better through better thinking at www.thesystemsthinkingreview.co.uk where you can learn more about advances in improving thinking and method.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.
 

During my lifetime I have witnessed two attempts at Activity-based Costing (ABC).  For those unfamiliar this is  an approach that flowcharts processes (activity) and then totals the costs of these activities.  Seems a reasonable approach to anyone trying to manage costs and productivity.

The method deployed is to interview workers involved with the process and find out how long each activity takes and what percentage of their time is attributable to each activity.  Each worker is allocated indirect costs (overhead) for things like lease expenses, information technology, human resources, etc.  The result is an activity cost.

The flaw of ABC is to assume that being active is being productive.  As managers like the idea that workers being active 100% of the time is to be efficient.  Such thinking brings the human robot to mind.

My personal experience has been attempts by accounting organizations coming in and doing organization-wide ABC.  The problem was at the end of the ABC exercise, I summed up the activity costs multiplied times the volume of actual activity and the costs did not come close to the organization’s total costs.  This was problematic, but by no means the end.

ABC treating all activity as work to be done ignores failure demand (demand from customers caused by failure to do something or do something right for a customer), duplication, errors, etc.  This is to manage costs instead of the causes of costs.

Where costs are high to deliver service, organizations still need to understand customer demand and the reasons for waste before making changes to the organization  Or they run the risk of making things worse.  To set targets for a piece or function of the process ignores the understanding of the end-to-end system and purpose.  

If a function or process is deemed too expensive it stands to be paid attention to by looking for cheaper outsourcing or shared services opportunities.  These also lead to increased costs as it disregards the end-to-end costs and waste that are not seen in the activity as already illustrated above.

My Vanguard partners in the UK found that the inventor of ABC Thomas Johnson changed his mind about the benefits of the technique after spending time at the Toyota plant in Georgetown.  He came to his senses regarding the foolishness of managing through costs.  My hope is that the US government and other private sector businesses will come to the same conclusion.  Millions are being wasted by conducting and taking action on the ABC approach.

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Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

It’s like a bad movie that seems to get replayed in every city, state, or federal government.  It starts with strategic intent and political bravado that turns to a feeling of malaise.  That uneasiness that accompanies you when you know things aren’t just right.

For me it has always been that technology just can’t deliver the goods promised.  No matter what the industry I have worked in doing consulting work the mantra remains the same.  We can automate it, there’s way too much paper or manual processing. 

Seems plausible to anyone seeking to modernize the work that is being done.  If you are in government management you know that is where the money comes from to modernize via the use of technology.  After all, this is what public sector innovation is all about.

Yet, this is the great technology caper.  We spend millions to modernize and yet services continue to become more expensive and provide us with worse service.  The hype just doesn’t live up to the value.

The issue is not technology in and of itself, but the fact it is not the biggest lever for improvement.  The design and management of work is our opportunity.  Government management has pieced together a system comprised of front/back offices, redundancy, handoffs, queues, multiple sorts and other bad designs that don’t need to be automated, but redesigned.  Technology just locks in the waste if the system isn’t designed well.

But that is not the end of the story as just redesigning systems isn’t enough.  We must rethink the management of the work and the way we increase complexity to inspect in quality rather than fix the problem or put in targets that create sub-optimization and waste.  It doesn’t stop there either . . . mandates, legislation and other mis-guided efforts have led to a financial infrastructure that our US tax base is unwilling to continue to bear the weight.

The great modernization caper has to include a willing participant or at least an ignorant one.  As grasping at straw men like shared services, automation and outsourcing is certainly better than doing nothing (which it is not).  Attractive ideas that really have no way of helping.

As we enter this age of provisioning services with less and less "revenue" from the taxpayer base.  We are in need of better thinking about how these services are delivered.  Let’s just not get carried away with the technology.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.


 

• Drive cost and effort out of line and support services, including IT services
• Add value to line and support services
• Line staff will have better information or tools to do their job
• Leverage existing agency resources, data and processes avoid duplication
• Reduce Risk
• Reduce time to market
• Reduce time for problem resolution

• Standardization is possible
• Resources are underutilized
• Economies of scale are possible
• If an agency has data, a facility, an application or a process that other agencies need or currently duplicate. It could be a candidate for a shared service.

1. Economies of scale – This is mentioned as a primary reason for sharing services.  The concept of economies of scale go unchallenged despite evidence that there are better methods and thinking.  Costs are not reduced by scale, they are reduced by flow (economies of flow).  Economies of scale leads with the belief that by lowering transaction costs we lower total costs.  The management paradox is that costs are in the flow, end-to-end from a customer perspective (flow) and to focus on transactions creates sub-optimization and waste (counter to its intent).
2. Standardization –  One major problem in this directive is the focus to standardize.  Something good for manufacturing, but not for service.  Service offers variety of demand unmatched by manufacturing.  Standardization does not allow for the absorption of variety offered by service.  And when service variety can not be absorbed, costs go up and service is worse.
3. Front Office – Back Office Design – Accepted as "best practice" (a fallacy on its own) the front/back office design is staple to areas to share services.  The problem isn’t that they are too small (economies of scale), but that the design itself needs to be called into question.  The functional separation of work (derived from Frederick Taylor and scientific management theory) front/back office design sends the work to specialists through IT to get worked.  Many times I have found that this design is unwarranted and only a front office is needed, something that a shared service strategy misses.
4. Information Technology – Most shared service concepts are introduced by IT.  As IT is needed to move things from front to back office.  IT needs standardization to code software as variety of demand is so great in service to code for the great variety of customer demand is an expensive proposition.  I have found that IT only locks in the waste and manifests itself in failure demand (demand caused by the failure to do something or do something right for a customer).  Government management would see an increase of failure demand as a result in sharing services with a cost focus.  In US government, I have found failure demand to run 40 – 90% of all demand.  Other costs in flow disruption are commonly found.

I have found a better way, before sharing services we need to start by understanding current performance.  More specifically, the "what and why" of current performance.  This begins with studying customer demand, understanding how well the service is currently being delivered, and identifying wastes and its causes. Next, is to improve the service where it is delivered while teaching managers about service re-design to avoid assumptions around shared services. 

The final step is then to decide whether sharing services or IT makes sense.  We can pull the concepts in . . . rather pushing them through directives from the Governor.  Acceptance is immediate as change is emergent as decisions are made with the work.  Costs fall as service and flow improve and failure demand is eliminated.

We are in desperate need of better thinking to have the public sector provision services cost effectively.  I can only hope that Governor Gregoire will see and rethink her shared services strategy directive.

Leave me a comment. . . share your opinion!  Click on comments below.

Anyone wanting to learn more about shared services and a better way can contact me at (317)849-8670 or at [email protected].  I have papers, books and other information to help in a better way to think about shared services or to make the work work.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

 

• Moving the work to a central location removes continuity.
• The creation of waste from handoffs, rework and duplication.
• It lengthens the time to deliver the service.
• It increases the amount of failure demand (demand caused by a failure to do something or do something right for a customer.
• The Front-Back Office design is not always the best design for the work.

What we need to do instead is understand that the design and management of work is in question.  This requires understanding our organizations as systems by performing check (from the Vanguard Method) where we understand the what and why of current performance. 

Starting with an understand of customer purpose and demand, deriving customer measures from purpose an organization can improve services first.  Based on knowledge gained from "check" an organization can determine whether or not sharing services makes sense.  Making decisions about shared services from knowledge is always a better way.  Don’t you think?

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

 

To many "Joe the Plumber" is their hero.  For me it is Joe Lamb of Brick Township in New Jersey.  Joe "the Lion" Lamb (hey, I can have nicknames for my heroes too) is challenging shared services in his township and more . . . he is challenging the conventional wisdom that it is the right thing to do.

I was forwarded a link to the Brick Township Bulletin titled "Shared services revenue easy to follow, reader says."  The reader along with the Mayor and Business Administrator deem it bizarre that "Joe the Lion" would challenge such savings that anyone can see.

The Business Administrator walked the reader through the almost $300,000 in "savings" from shared services.  The problem here is that the "visible" figures in which governments are managed don’t represent the true costs as they are end-to-end and in the flow.  It may very well be that the shared services strategy has increased costs when we look at the end-to-end costs. 

And "Joe the Lion" was asked if he was familiar with municipal accounting practices or budget law.  "Joe the Lion" responded "no" to each during a council meeting.  The writer challenges that a township certainly doesn’t want to elect such an official.  I would submit "Joe the Lion" is probably the best candidate because he doesn’t understand these things.

"Joe the Lion" may understand that efficiency doesn’t necessarily make you effective.  More importantly, that shared services done without an understanding of customer demand and service flow will indeed increase costs.  But cash-strapped governments searching for savings wind up increasing costs with shared services.  In a management paradox . . . to focus on costs increases them. 

Moving work to a central (shared) location removes the continuity of the flow, creates waste (hand-offs, rework, duplication), lengthens the time to deliver the service and creates failure demand (demand caused by a failure to do something or do something right for a customer). 

The financials will show savings (lower costs) while the failure costs will be on another budget.  It won’t be long before managers deprived of local support will find ways to recreate it.  Thus increasing the costs even more.

For governments big and small looking at shared services, consider these dos and don’ts and consider economies of flow (not scale).  These offer larger opportunities for improvement than management by the numbers.

For the reader/writer your final question, "Can the taxpayers afford to have council members and mayors who don’t know about municipal budgets?"  The answer is a resounding . . . YES!!!!  And "Joe the Lion" may just be "Joe the Fox" . . . Hmm.

Leave me a comment. . . what do you think?!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.
 

• Make assumptions about your Government Service being the same as another department, state, agency, etc.
• Listen to an opinion from vendor "experts" about your Government Service
• Listen to stories about standard metrics or KPIs for your Government Service
• Assume that a front office – back office split is an optimal design (a common requirement to shared services – combining the front office or the back office)
• Assume that costs are in the transactions and economies of scale
• Don’t buy any technology until you understand your system

• Understand that costs are in economies of flow (not scale)
• Understand that you must get knowledge about your own Government Service by performing check
• Understand customer demand and measures from the outside-in
• Understand the concept of failure demand and how much you have as a percentage of your total customer demand
• Understand that information technology should be the last thing to look at when dealing with shared services
• Redesign your services first

A shared services strategy (or any other strategy) done without knowledge of your system as outlined in this post is destined for an expensive failure.  Government officials can not afford to fall into this trap and taxpayers should be intolerant of anything that does not improve service and decrease costs.  Government officials must become good stewards of tax dollars.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.
 

Let me take you back to a simpler time when people helped people.  I’m not talking about Little House on the Prairie times, but probably late-70s and early 80s where computers began to dominate the scene.  Since this time our fascination and zombie-like attitude toward information technology (IT) has continued . . . at great cost.

A combination of media, business and government  with unbridled exuberance has done nothing to . . . well, keep things in perspective.  When improvement is needed we turn to technology.  Innovation leadership can not be achieved without IT, correct?  Wrong, and not just wrong but costly wrong.

In our collective psyche we have managed to place IT on such a pedestal it has become a dominate industry, more so than the industries to which they serve.  But in a management paradox, IT has failed to deliver in many cases.  And I am not just talking about missed schedules and cost over-runs.

The problem is that in our rush to go paperless (never happened) and automate (not always a good idea), we lost track of the ability to design and manage work optimally.  The current thinking of outsourcing, shared services, business analytics, Business Process Management, IVRs would never have been possible without Information Technology.  But one question never seems to get asked, "Since IT can, should it?"

I have to say a resounding NO is in order.  In fact, I would submit to you that larger gains in innovation can be achieved through better thinking around the design and management of work and pulling IT into the work as needed is more in order.  Then maybe, just maybe we can learn that cost reduction and business improvement can come from better thinking and not IT.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.




 

One thing you can plan on is when a bad idea catches fire, it is hard to stop.  Outsourcing vendors, public sector consultants, private sector consultants, cost accountants, CPAs, MBAs, CEOs, CFOs, etc. etc. all want to reduce transaction costs.

 I am yet to see any company when we really look at the financials and other customer data gain business cost reduction by focusing on reducing  transaction costs. Total costs always rise . . . eventually.  Why, public sector and private service organizations don’t understand that cost are in the flow not the (transactions) activity.

The counter intuitive truth and management paradox is that focusing on costs always increases them.  My other posts have shown why standardization, scripts and best practices don’t allow the absorption of variety that customers give service organizations.  The number of transaction increases in the form of failure demand (demand caused by the failure to do something or do something right for the customer) increases and the system works against itself to increase costs.

So ill-advised managers march off to lower transaction costs by using outsourcing, shared services, reduced service levels, etc. so they can avoid increasing transaction costs and all these decisions lead to more transactions and more costs.  They are missing the great lever for improvement.

The great lever for improvement is flow.  Flow is improved by designing our service systems against customer demand, end-to-end from their perspective.  When customers get what they want, costs fall because the flow satisfies customer demand.  The counter-intuitive truth here is that when good service from well-designed work happens, costs fall.

The management paradox is that the design of work in almost every service organization inhibits the flow and the measures have nothing to to with customer demands, end-to-end from their perspective.  The opportunity to improve is huge, not 5-10%, but 40-80% or more.  The only question now is are you ready to deal with it?

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

I have multiple blog posts on this subject, but decided it was time to devote a post just to this topic.  This thinking has dominated our collective US psyche for a century.  We don’t even recognize it, because it is the way we do business and organize our government agencies.  It is like breathing, we don’t have to think about it . . . we just do it.  If you ever want to screw someone up in golf, just ask them if they "breath in or out" on their backswing.  They start thinking about it and the result is they lose concentration.  Try it.

Systems thinking is an improvement over Frederick Taylor’s scientific management theory.  The functional separation of work of scientific management leads to what W. Edwards Deming called "sub-optimization" or when we optimize each function we don’t get a good end-to-end (system) result. 

One of the problems I have with outsourcing is that we take a function (call center typically) and try to optimize it by getting the "experts in that area" to do it.  Sounds plausible, but systems don’t react that way.  Some of my readers take exception (outsource vendors) and this isn’t to say that outsourcing is all bad, but the assumptions it will reduce costs are bad.  Unless the outsource vendor understands how to optimize a system and not a function all is lost.

The same can be said for those pursuing a shared services strategy.  If we combine call centers or back office functions we will reduce costs (or at least the visible ones).  Again, sounds plausible, but most of the time the organization winds up increasing the total/end-to-end costs to the system.  No savings and in a management paradox these moves increase costs.

Our best bet is to decrease costs by understanding our organizations as systems.  This will require that I ask you (my readers), Do you breath in or out on your backswing?  Maybe a break in our concentration is just the remedy for better thinking.

Leave me a comment. . . I can take it!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

• The use of targets making the performance worse making them the defacto purpose rather than the customer.  Always people are focused inward vs. outward.
• Raising new specifications for compliance without knowledge to do so.
• The assumption that shared services will reduce costs. This thinking based on economies of scale rather than economies of flow.
• The waste of money by preparing for inspections and obviously supported and recognized by the comments at the Local Government Chronicle.

• Reign back its activities to following the money.
• Limit inspectors to one question: "What measures are you using to understand and improve performance?"
• Put measures and method with the local authorities to promote innovation and responsibility.